The ASEAN taxonomy for sustainable finance creates a complex environment for grid projects by linking their eligibility for green funding to the clean energy performance of the entire power system. According to the authors of the newly released report, this system-level focus means many projects linking regional grids may struggle to qualify for environmentally focused capital in the immediate future, particularly in areas still transitioning away from fossil fuels.
“Under the ASEAN taxonomy for sustainable finance, electricity transmission qualifies as green when it is part of a system where 67% of capacity additions in the previous five years are from low emissions sources, or the lifecycle emissions intensity of the system is less than 100 grammes of carbon dioxide per kilowatt-hour over a five-year rolling period.” The report further notes that “some interconnector may not be eligible for green financial instruments by regional and international standards in the short to medium term.”
Essentially, for a power line to be labeled “green” and access specialized environmental loans, the electricity grids it joins must already be making significant progress toward clean energy. If a country is still adding traditional power plants like coal, its grid projects might fail to meet these strict requirements, even if the new lines are intended to eventually help carry renewable power. Furthermore, because these rules look at the performance of the whole energy system rather than just the specific project, developers have very little control over whether their infrastructure is officially recognized as a sustainable investment.
The report “Financing the ASEAN Power Grid” was published by the International Energy Agency in Paris in March 2026. Lead author James Bragg and a team of analysts provide a comprehensive framework for unlocking the capital required to build a more integrated and sustainable energy future for Southeast Asia.
